Euro

Lord Pearson of Rannoch Excerpts

Thursday 27th October 2011 Lords Chamber

[Lord Hannay of Chiswick]

My Lords—

[Lord Pearson of Rannoch]

My Lords—

[Lord Dykes]

My Lords—

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[Lord Pearson of Rannoch]

My Lords, is it not obvious that last night’s measures are merely yet more sticking plaster on a wound that will therefore continue to poison the world economy? Is not the only answer to abandon the whole ill-fated project of European integration, get rid of the euro and go back to the democracies of Europe freely trading together and with the rest of the world in their own currencies?

[Lord Sassoon]

No, my Lords, that is not the situation. Forty per cent of our trade goes to the eurozone, 50 per cent goes to the EU, and we have to work to preserve the structure.

Global Economy

Lord Pearson of Rannoch Excerpts

Thursday 11th August 2011 Lords Chamber

[Lord Pearson of Rannoch]

My Lords, my questions come against the background of the cuts generally and our perilous economic condition. They also feed in to our previous debate. My first question to the Minister is very simple. Do the Government accept their own figure of £9 billion a year, net cash, which we pay to Brussels, with no conceivable benefit to us? If they agree their own figure of £9 billion a year net, will they agree that that comes to some £25 million every day? The sum of £25 million a day would pay the salaries of 833 policemen every day, or 304,045 policemen per annum. I emphasise that that is net cash. I do not mention the costs of over-regulation of 6 per cent of GDP per annum in food and so on.

My second question is: do the Government admit that there would be no crisis in the eurozone without the euro? Do they also admit that there would be no eurozone without the ill-fated project of European integration? On the Statement, when they accepted the remorseless logic of a federal budget, which they appear to have done, are they convinced that the German people, the Dutch people and so on will put up with this? I think they may be mistaken.

Finally, how can they possibly say that the breakup of the euro would be economically disastrous, including for Britain? Could the noble Lord at least justify that because if we face the reality that the thing is going to break up—and the quicker we face it and the quicker it breaks up, the better—we would all be very much more comfortable?

[Lord Sewel]

My Lords, the Minister has rightly drawn attention to the weaknesses, indeed the failures, of the European political institutions in responding to the crisis. Would he care to reflect on the contribution of the political institutions of the United States to the present crisis? Could it possibly have something to do with the fact that they have a political structure based on two elected Chambers, one in which the Executive have a majority and one in which they do not? We have heard that somewhere before.

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[Lord Sassoon]

My Lords, I do not pretend to be an economist. I am sure that if I was sitting an exam paper now, I would fall well short of the mark that the noble Lord, Lord Eatwell, would get. The problem is that we do not live in a pure economics world. A lot of what we are struggling with now is where the world of economists meets the world of markets.

I am not sure where to start with the many interesting interventions that we have had. I go back to the question about the deficit reduction plan: there were some concerns about the size of the deficit rising and others expressed the opinion that we should be investing more and driving borrowing up. It is worth getting a little bit economicsy about this and remembering that there are things called automatic stabilisers, which mean that if the economy does not grow as fast as anticipated there will be additional payments in areas such as welfare, for example. It is worth remembering that the deficit goes up and down. Within the Chancellor's fiscal plans, more money gets pumped into the economy—crudely put—if growth is lower. We should always bear that in mind. There is no absolute rigorous number at which we shoot that does not vary as economic circumstances change.

On the point raised by my noble friend Lord Oakeshott and others about interest rates, of course low bond yields themselves are not a guarantee of growth. Germany has been mentioned, and I will come back to that. Yes, it would be great if we had a deficit as low as Germany and bond yields as low as it does, but the fact is that we have a deficit as high as Greece but interest rates as low as Germany. They are not in themselves a guarantee of growth, but if we divert from the basic course we could very well find ourselves with both a very high deficit and very high interest rates. In those circumstances, growth would be choked off very quickly. That is fundamentally why we have to stick to our plan. My noble friend also talked about tax cuts. To remind noble Lords, the coalition is set out on a track which is significantly raising, and already has raised, the starting level of tax for those at the bottom end of the income scale. That is an important part of the whole rebalancing of the tax and welfare package to get people back into work. Equally, at the other end, my right honourable friend the Chancellor has made it clear that, over the medium term, a top rate of tax of 50 per cent is not conducive to an economy growing consistently and driven by entrepreneurial activity.

My noble friend Lady O’Cathain reminded us of the very big picture and questioned the chances of getting agreement to action on the imbalances. She was right to say that it will be for the autumn meetings of the G7, the G8 and the G20 to make further progress on that. Although there has been considerable frustration about turning good words into action, the latest statements from Ministers are, let us say, modestly encouraging, but it requires a big push this autumn. My noble friend then moved from the very big picture to more micro matters, with the question of regulation and how difficult it is for businesses that want to grow. That is precisely why we have a moratorium on new regulation for micro businesses in the period up to 2014 and that new tests under the “one in, one out” rule are being applied to all new proposals for regulation from Ministers.

[Lord Pearson of Rannoch]

My Lords, what about the regulations that come from our friends in Brussels? The Government’s Answer to me recently said that a majority of all our business regulation comes from Brussels, and we can do nothing about it.

[Lord Sassoon]

If the noble Lord will be a little patient, I will get back to Europe in a moment.

It was nice to have confirmation from the noble Lord, Lord Radice, that we are all on the same side when it comes to wanting to strengthen the eurozone, even if he questions the motives of some of us in wanting to do so. It really is very important that this happens, and we should give it all our support.

On the other European matters raised by the noble Lord, Lord Pearson of Rannoch, his main questions were around the cost of this country’s contribution to Europe. He makes that contribution £25 million a day. I cannot calculate things that quickly, but the fundamental difference between that £25 million a day and the £120 million a day of debt interest that I referred to earlier is that the £25-million-a-day contribution to Europe buys us value for money. Of course we believe that Europe needs to get its budget in hand, that there needs to be much greater fiscal discipline in Brussels and that the proposals for a great expansion of the European budget are unacceptable. Nevertheless, we have to bring ourselves back to the main point that this country gets considerable value from its membership of the European Union, and that that is fundamental to making sure that we have good strong markets for our exports. Yes, there is a burden of regulation from Brussels, and we must make sure that Brussels starts to apply the disciplines that we are applying in this country before it brings forward yet more regulation.

A number of questions were asked by my noble friends Lady Kramer and Lord Cotter and the noble Lord, Lord Harrison, about access to various domestic and European funds. All I say as a general point is that I hear very loudly what is being said. The Government’s objective is to make sure that in direct lending by the banks and in other finance—the most reverend Primate reminded us that the banks are far from blameless in the situation that we are in, and my noble friend Lord Oakeshott and other noble Lords reminded us of the importance of the banks—there is a whole range of financing channels. We have the critical Merlin agreement and European funds such as the regional growth fund—

Finance: Eurozone

Lord Pearson of Rannoch Excerpts

Tuesday 19th July 2011 Lords Chamber

[Lord Sassoon]

I certainly agree with my noble friend about the relative seriousness of different crises that are going on at the moment, and I repeat that the crisis in the eurozone is extremely serious. As to prescriptions and questions about what the eurozone would do, my noble friend speaks words of wisdom. However, it would not be appropriate for a UK government Minister to lecture the eurozone as to what to do. We shall look with considerable interest at what the meeting of eurozone leaders over the next two days comes up with. It is important that they make further considerable progress.

[Lord Pearson of Rannoch]

My Lords—

[Lord Peston]

My Lords, is the Minister aware that some of us do not believe in exaggerating the problems of the eurozone or using the word “crisis”, which is immensely damaging and should not be used by Her Majesty's Government? Is he aware that, overall, the eurozone has been a great success? A vast amount of eurozone paper is held willingly throughout the world and ever more trade is being carried out in euros. Is it not about time that Her Majesty's Government took at long last a more positive attitude both to the eurozone and to Europe in general?

Finance: Off-exchange Trading Venues

Lord Pearson of Rannoch Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, I certainly agree that mechanisms that help liquidity such as dark pools, which are run by investment banks, multilateral trading facilities or independent operators, are indeed aids to liquidity if they form a proper part of the market. The proponents of high-frequency trading, too, cite them as an aid to liquidity. I completely agree with the noble Lord, Lord Bilimoria, that the last thing we want for example the European Commission to do is to restrict sensible increases in liquidity in our markets without looking at the evidence base that needs to be assembled.

[Lord Pearson of Rannoch]

Does the noble Lord agree that we can all relax on this question, because we surrendered supervision of our financial services—

[Noble Lords]

Oh!

[Lord Pearson of Rannoch]

Yes, my Lords, and to the biggest black hole of them all in the shape of the European Commission. Do the Government agree that we can surely rely on this body to come up with an honest solution to any problem, if only because it has not been able to get its own accounts signed off by its internal auditors for the last 16 years?

[Lord Sassoon]

My Lords, I certainly do not think we should relax on the issue of high frequency trading. We only have to think back to the events of 6 May 2010. I do not need to remind your Lordships that there were two crashes on that day: one was the crash of the outgoing Government; the other was the so-called flash crash in which the Dow Jones index plummeted in a number of minutes by 9 per cent but fortunately, unlike the Labour Government, recovered by 9 per cent a few minutes later. We certainly take this issue very seriously but we need to continue to do the work and see where this leads us.

EU: Financial and Monetary Co-ordination

Lord Pearson of Rannoch Excerpts

Monday 6th June 2011 Lords Chamber

[Lord Sassoon]

My Lords, the Government have secured a very clear agreement with the European Council. Whatever the analysis of Article 122 has been in the past, the Council of Ministers has been completely clear that Article 122 will not be used in the future. That is the critical thing. It is probably not right to go on raking over decisions about who was not in the eurozone in the first place. We have to make it work now, and one way of doing that is to get a proper interpretation of all the relevant articles in the treaty.

[Lord Pearson of Rannoch]

My Lords, does the noble Lord agree that the previous Government made a very expensive mistake two years ago when they failed to veto the overall supervision of our financial services passing through Brussels? Is it not grotesque that an outfit that has not been able to get its own accounts signed off for 16 years should now be in a position to dictate to the City of London, and thus cause lasting damage to its profitability and tax revenues?

EU: Budget

Lord Pearson of Rannoch Excerpts

Thursday 28th April 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am happy to say that we are already on the case in this matter. At the ECOFIN in February, the UK issued a joint statement with the Netherlands and Sweden making various points about what we believed needed to be done by the European Commission and the auditors in coming years. That included, among other things, moving the European audit basis to a more risk-based approach, which I think precisely addresses the point that the noble Lord rightly brings up.

[Lord Pearson of Rannoch]

My Lords—

[Lord Hamilton of Epsom]

My Lords—

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[Lord Pearson of Rannoch]

My Lords—

[Noble Lords]

Cross Bench.

EU: European Financial Stabilisation Mechanism

Lord Pearson of Rannoch Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend Lord Newby for again bringing us back to important current matters. The results of the Irish banks’ stress tests, as I understand it, will be released by the Central Bank of Ireland at 4.30 this afternoon, so it would be inappropriate to comment on them. Of course, the Irish authorities have consulted Her Majesty’s Treasury, the Bank of England and the FSA about the impact of bank restructuring, and the Government expect that the forthcoming announcement will remain in line with the broad principles of the support package provided to Ireland. I would just add that the Government have made clear their commitment to ensure that the Northern Ireland banking sector continues fully to meet the needs of businesses and consumers in Northern Ireland.

[Lord Pearson of Rannoch]

In view of what the noble Lord has said, whatever Mr Darling and Mr Osborne may have said to each other is entirely irrelevant because the Commission had the nerve to bring forward the mechanism under a clause in the treaty—in fact, the clause is to allow member nations to help one another in natural disasters—which is decided by majority voting in the Council. Therefore, the British Government had no hope of avoiding our 14 per cent share of £50 billion, which we can ill afford at the moment.

[Lord Sassoon]

My Lords, without rerunning previous discussions with the noble Lord, Lord Pearson of Rannoch, on the precise interpretation of the articles, the critical thing is that under the agreement reached at the European Council on 17 December, and very much led by my right honourable friend the Prime Minister, it is clear that Article 122(2) of the treaty will no longer be needed for purposes of support in this form. Without debating what has happened in the past, let me just say that my right honourable friend at the European Council has secured complete clarity for the future.

Currency Markets

Lord Pearson of Rannoch Excerpts

Wednesday 2nd February 2011 Lords Chamber

[Lord Sassoon]

I am grateful to the noble Lord and I thoroughly endorse his sentiments. This country has benefited greatly in recent years through the crisis by not being in the euro and by being able to develop our own policy responses. This coalition Government have no plans to enter the euro and are not making any preparations to do so at any future date.

[Lord Pearson of Rannoch]

Will the noble Lord go further and agree that, if the euro had never been invented, the currency markets and the world economy would not be in the trouble that they are?

[Lord Sassoon]

No, I would not want to go that far.

EU: Budget

Lord Pearson of Rannoch Excerpts

Monday 10th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am grateful to my noble friend for drawing attention to a clearly unsatisfactory situation. Year after year, the European accounts cannot get a clean audit opinion. However, it is the Government’s view that the way forward is not to press for treaty changes but to try to make sure that the whole system of accounting is made simpler and clarified. It should concentrate on what is important, and the capabilities of both the European Commission and other agencies—whether at the European level or, particularly, within member states—to manage the money should be enhanced so that we get out of an appalling situation that we do not want to see continue. However, treaty change is not the appropriate vehicle.

[Lord Pearson of Rannoch]

My Lords, can the Minister think of a better word than “grotesque” to describe the situation whereby the overall supervision of our priceless financial services has been passed to an organisation that, as he has mentioned, has been incapable of getting its own accounts signed off by its internal auditors for 16 years?

[Lord Sassoon]

My Lords, I said that the situation in which we find ourselves, with the European accounts not getting a clean audit opinion, is completely unacceptable. The connection between that and the regulation of financial services in Europe is somewhat tenuous. We should focus on ways of improving the budget situation. My right honourable friend the Prime Minister has already taken steps, both on this year’s budget and by talking about what we expect from the financial framework for the next seven years of the budget. Those are the ways in which we have to move forward determinedly.

Loans to Ireland Bill

Lord Pearson of Rannoch Excerpts

Tuesday 21st December 2010 Lords Chamber

[Lord Liddle]

My Lords, first I apologise most sincerely to the Minister for not being in the House for the start of his speech. I was trying to catch what his ministerial colleague Mr Lidington was saying to us in evidence in the EU Committee about the permanent mechanism.

I support very strongly the principle of helping Ireland in its hour of need. The case seems self-evident given the interconnectedness of our economies, with 5 per cent of our exports going to the Republic, and the consequences for us of a collapse of its economy, which would be serious, not least for British banks.

No simple solution such as coming out of the euro is available for Ireland, as a lot of people who opposed the legislation seemed to think. It is worth bearing in mind that, were a member state to try to come out of the euro, there would be a very big devaluation. That would cause a collapse in living standards and purchasing power, which would have knock-on economic consequences particularly, in Ireland’s case, for Britain. Moreover, its debt would continue to be denominated in euro. As the new currency had depreciated, there would almost certainly be a default that required a restructuring of that debt, again with very severe consequences for the British financial system.

However, while I fully support the objectives of the Bill, I dislike it considerably. I dislike it because of its bilateral nature. The Government are profoundly wrong in the working assumptions that lie behind this bilateral Bill: that the euro problem is a problem for the eurozone, that it is for the eurozone to sort itself out, and that it is none of our business. That is profoundly misguided and not in the UK’s national interest.

It is wrong for three reasons. First, as we in Britain seek the necessary rebalancing of our economy towards exports and investment, it is absolutely clear that we are dependent on very strong growth in the euro area, which is our biggest market. I know that the rest of the world is growing much more strongly and Asia is growing very strongly indeed, but Germany, more than the United Kingdom and other members of the European Union, is getting the most benefit out of that global expansion. We will be the beneficiaries of that German growth in the eurozone. We live in Britain today in an economy that is deeply integrated into the rest of Europe. Our fortunes are dependent on the rest of Europe. It is completely misleading to talk about their problems over there and think that we can sort out our problems over here as though they are completely separate questions.

Secondly, our banks are extremely interconnected. I was reading the Bank of England’s report on financial stability, which was published last week. It states:

“UK banks’ holdings of sovereign debt issued by countries under heightened strain are relatively small. But total claims on these economies, including lending to households and businesses, are larger ... Losses on such lending could increase were heightened sovereign concerns to be accompanied by weakening economic conditions. Credit risk could also be amplified by the interconnectedness of European banking systems. UK banks have claims of almost £300 billion on France and Germany, whose banking systems are more heavily exposed to the most affected economies”.

The Bank of England argues that there is strong interconnectedness, and we must think in those terms, not that we are something separate and apart.

Thirdly, when there is a crisis, we will end up paying for it just as if we were in the eurozone. I looked at the Hansard report of the debate in the other place on this subject and at what the Chancellor of the Exchequer had to say about it. He said that,

“our contribution has been calculated on the basis of what we would have paid if we had been part of the facility”.—[Official Report, Commons, 15/12/10; col. 946.]

In other words, it is a bilateral contribution but it is based on a calculation of what we would have paid if we had joined. Mr George Osborne goes on to say:

“We are paying pretty much exactly what we would have paid if we had been a member of the euro”.—[Official Report, Commons, 15/12/10; col. 948.]

We cannot avoid our obligations to the rest of the European Union by pretending that this is something apart from us.

What is going on here is that UK politics is taking priority over the national interest. Clearly, we in Britain are in this up to our necks. Our banks are in it up to their necks and our prospects for growth are dependent on the euro area. Instead of the Prime Minister saying, “This is nothing to do with us”, he should be doing today what Gordon Brown did in October 2008; he should go to the summit of the eurozone countries and say, “Here is the plan to rescue the banks in the area. Britain has a vital interest in being part of this”. Instead, we get a washing of the hands of Britain's role. It is clear that this policy will not last. I looked at what various economic experts were saying about the likely pattern of what was likely to happen in the eurozone. It is difficult for the Government to comment on this because no Government can forecast that there will be defaults.

I looked at an article by the one professor who forecast the crash of 2007 and 2008—Professor Roubini. In his view, what he describes as the current strategy of kicking the can down the road will soon reach its limits. He goes on to argue that,

“Europe must … implement early orderly restructurings of distressed sovereigns’ public debt”.

The consequence of the orderly restructuring of distressed foreign debt would be the necessity also to carry out another restructuring of the European banking system, in which Britain’s banks are intimately involved. Instead of doing these bilateral things, we should be putting ourselves at the heart of Europe and of the argument about what needs to be done in order to rescue the European economy. What we are seeing here is a policy for marginalising Britain that is profoundly against our national interests. We will pay a very high price for it in future, because when the new mechanism is set up the key economic decisions will be taken by the eurozone, which will go along to ECOFIN, and Britain will be forced to agree with what the eurozone has decided because decisions are taken by qualified majority voting.

This principle of staying out and doing bilateral deals is a very bad policy for Britain. It is putting playing the politics of the Daily Mail and Rupert Murdoch before a real, patriotic sense of where our national interest lies.

[Lord Pearson of Rannoch]

My Lords, during the noble Lord’s remarks I think that I heard him say that British prospects for growth depend on the eurozone. Could he enlighten us as to his views on the prospects for trade in the rest of the world?

[Lord Liddle]

I touched on that subject, because I said that Germany was taking far better advantage of global growth than we are at present. The Prime Minister is absolutely right to try to expand our exports in India, China and other countries, but the fact is that German export success benefits us in the growth in the eurozone, which accounts for half our exports.

[Lord Newby]

I thank the Minister for his very clear introduction to the debate. I was slightly concerned, however, that he did not refer the House with the degree of attention that it may deserve to paragraph 21 of the Explanatory Notes, which deals with the compatibility with the European Convention on Human Rights. I was tempted to ask him whether the law officers had been consulted before the Chancellor of the Exchequer made the statement that,

“pursuant to section 19 of the Human Rights Act 1998 … the Bill is compatible with the Convention rights”.

As this is the first time that we have debated the Bill, the Minister has not had the chance to give any undertaking to speak to the law officers, and it would be invidious to ask him to do so. However, one hopes that that will not be necessary.

Was there any alternative to the loan and the Bill? As the noble Lord, Lord Liddle, has explained, there was not. If the EU had not intervened in the dramatic way in which it did, it is almost certain that Ireland would have had to default and leave the euro. That would have been bad not only for the eurozone but for the UK. It would have been bad for the UK for trade reasons—I shall come back to the point made by the noble Lord, Lord Pearson, a bit later in my speech—as we have a large volume of exports to Ireland. Indeed, 40 per cent of Northern Ireland’s exports go to the Republic. I am sure that the noble Lord, Lord Bew, will expand on that point.

The prospect of Northern Ireland, as a depressed region of the United Kingdom, suffering significantly as the result of a major crisis in the Republic would have had not just a severe impact on Northern Ireland but, obviously, a severe knock-on effect here, including to the public finances. We would have had, in effect, to have filled in some of the hole that would have been knocked in the Northern Ireland economy. Such a crisis would also have been bad for the UK because of the exposure of UK banks. Again, as the noble Lord, Lord Liddle, pointed out, the Bank of England has set out starkly the scale of that issue. A default would have led to instability in sovereign debt markets more generally and could have increased the costs of UK government borrowing.

That does not necessarily mean that we agree with absolutely everything that is being done to restructure the Irish banking system. The arguments for establishing the National Asset Management Agency can be made either way. Effectively nationalising all the risks taken by all the Irish banks raises moral-hazard issues, which we have sought to avoid to a considerable extent in the United Kingdom.

Another issue is whether, even with all this activity, we will have been successful in stabilising the Irish economy. To pose the question that Martin Wolf posed in the Financial Times recently, the question is not whether the Irish banking sector is too big to fail but whether it is too big to save. Hopefully, the answer is that the Irish banking sector can be saved as—heaven knows—it is not lacking resources. The amount that has gone in both from the Irish Government and, via them, from the EU is now considerable.

It would have been irresponsible for the UK not to participate in the Irish bailout, but the Irish problem is not the only issue facing the eurozone. There are broader issues that relate to Greece, Portugal and now Spain and Italy. Given that we are outside the eurozone, it is a logical if inglorious position for us not to commit to taking part in any further bailouts of other member states.

When contemplating this debate, I cast my mind back to the debates that we had a decade ago on whether Britain should join the euro subsequent to, as many noble Lords will remember, the famous five tests. I am pleased to see the noble Lord, Lord Morris, in his place. Uniquely in my hearing, he was able to make a joke—which at least I laughed at at the time—about whether we should join the euro. At a TUC summer reception, he said that, having been asked by the then Chancellor, Gordon Brown, what he thought about the five tests, he had replied, “Well, we’ve won one, we’ve lost one, we’ve drawn one, but I think we might win the series in Sydney”. A decade on, a lot has changed both in cricket and in our perceptions of the euro.

At that time, many of us on these Benches supported Britain’s attempts to join the euro. One of the joys of doing a considerable amount of work with Charles Kennedy, as I was doing then, was that we were summoned from time to time to see the Prime Minister for an uplifting talk on matters of common interest and concern, of which the euro was one. At that point, Charles Kennedy was keen to press the case for British membership of the euro on a Prime Minister who was keen but extremely nervous about that prospect. Indeed, he said at the time that he would like to join the euro but he thought that it was impossible to beat both public opinion and the popular press—he could beat one, he thought, but not both—so he did not attempt it. As a result, we are now in a situation in which nobody seriously thinks that we should join the euro in the foreseeable future. Although it is inconceivable—for the reasons given by Tony Blair among many other reasons—that we should join the euro at this point, some of us at least are not absolutely convinced that we took the right decision a decade ago.

However, if I were to dilate on that argument and those tests, I would no doubt keep your Lordships here all evening. I know how much Members—particularly those opposite—hate overlong speeches. The noble Lord, Lord Hunt, is clearly already extremely impatient with me, and I can understand why that might be the case.

Even though we are agreed that we should not join the euro, two interlinked questions need to be considered—we cannot amend the Bill, and it would be foolish to attempt to do so—in this discussion on the Bill, which gives us an opportunity to range slightly wider. Realistically, what should our role be in terms of ensuring financial stability within Europe? And what should the eurozone do now? As I say, the two issues are inextricably linked, but the first principle should surely be to support eurozone members in doing whatever they agree is prudent to strengthen the working of the eurozone. For example, it would surely be perverse and ridiculous if the Government committed themselves to having a referendum on changes to the EU treaties that eurozone members decided were necessary to allow eurozone members to support each other more effectively. Can the Minister assure us that, as a non-eurozone member, we will wave through any proposed changes to the EU treaties without requiring a referendum in the United Kingdom?

As the noble Lord, Lord Liddle, has pointed out, the Chancellor is more generally in an extremely odd position when considering the development of the eurozone. The eurozone’s success or failure is obviously of crucial importance to the future of the British economy, as has been exemplified by the situation in Ireland. However, as the noble Lord pointed out, there are three reasons why the success or failure of the euro and the eurozone is important to us. The first of those reasons, to which he referred—and on which he was challenged by the noble Lord, Lord Pearson of Rannoch—relates to trade. It seems to me bizarre and sad that we export more to Ireland than to the BRICs combined. However, that may be a slightly misleading figure, as I suspect that the figure includes all the re-exports of goods that come from the rest of the world to Ireland via the UK. For example, I suspect that goods that are shipped from France to Ireland by road through the UK count as UK exports to Ireland. I may be wrong on that, but that may slightly inflate the figure. Even if that is not the case, the figure is still very high.

However, if one wants suddenly to change gear completely and export significantly greater amounts to the BRICs, the problem is that, frankly, that is easier said than done. It is not easy for a small business suddenly to decide to sell its products in China or Brazil, given the problems of language and distance. Therefore, even with the best will in the world, it would take a while before we could re-orientate our trade significantly away from the eurozone, particularly given that our strength rests in exports of services, many of which are easier to export to the eurozone than to the BRICs. That is particularly the case in countries where there are institutional barriers to exports of services. It is not simply that a lawyer or accountant seeking to open an office in India has their work cut out for them but that they cannot do it. Therefore, it would be an extremely difficult challenge for the UK simply to do a handbrake turn and suddenly start newly exporting huge quantities of goods to the BRICs. Therefore, we need the eurozone to do well, because that is where many of our exporters already have links and where, as we grow, they could develop those links significantly more.

[Lord Pearson of Rannoch]

My Lords, of course I admit that our trade with the eurozone is important, but is the noble Lord aware that our trade with the rest of the world—both inwards and outwards—is in fact increasing very much faster than that with the eurozone? Surely that points the way to the future rather than to the past.

[Lord Newby]

My Lords, the fact that such trade may be increasing more quickly is not surprising for two reasons. First, it is increasing from a smaller base, so it is easier to achieve a higher percentage increase. Secondly, most of those economies are growing more quickly than the eurozone, so you are feeding into a more buoyant economy. I completely accept that, but my point was slightly different. Incidentally, another problem about exporting to some of those other countries is that the newly passed Bribery Act is making many companies, not least small-to-medium-sized companies, very wary about their ability to export to China or India, for example, because they fear—sometimes rightly and sometimes, no doubt, incorrectly—that they may be faced with business practices there which they need to follow in order to gain access to a market but which they would not have to follow in the eurozone. In the medium term, I am extremely optimistic about the prospects for exports to the BRICs, but in the short term, given that we are starting from a relatively low base, it is a forlorn hope to think that the BRICs can solve our export problems.

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[Lord Newby]

Well, as I am sure the noble Lord is learning, we do things differently in your Lordships' House. I realise that I must make progress.

[Lord Pearson of Rannoch]

Even in your Lordships' House, I believe that I am right in saying that the Companion suggests that Second Reading speeches should be curtailed to some 15 minutes. We are now in the 17th minute of the noble Lord's peroration.

[Lord Newby]

My Lords, I am extremely grateful to the noble Lord for making that point. He will be aware that I have been interrupted on a number of occasions. However, I am well aware of the conventions of the House and will happily draw my speech to a conclusion by saying, as I said at the beginning, that we support the Bill.